Eddington says most will fail

A report by Steve Creedy in The Australian says that a flood of extra capacity into the Australian domestic market will increase competition and there is no guarantee all players will be able to stay the distance, former Ansett and British Airways boss Rod Eddington predicts.

Sir Rod told the Australian British Chamber of Commerce on Tuesday that the domestic market had been one of the few that was truly rational, but history had shown it would support two carriers.

He said most airlines that tried to start up in Australia did not last.

“We saw Compass Mark I start and fail, we saw Compass Mark II start and fail,” he said.

“When Virgin Blue and Impulse started, tragically it was the incumbent Ansett that failed, rather than new start-ups.”

“History shows that this market domestically will support two-ish airlines.”

“Whether or not the past will go into the future I don’t know, but my instincts are that we’re going into a period now of competitive capacity.”

The former aviation chief said the market had probably been in balance, or just under, since the collapse of Ansett.

He said that with the start of Jetstar, the market was already supporting two and a half airlines.

How Tiger Airlines entered the market would determine what happened next.

He noted that Tiger chief executive Tony Davis knew the business and the airline had strong backers, but with Jetstar looking to grow and Virgin expanding its fleet with its new Embraer jets, it would be “a very competitive period, and history suggests that in that environment not everyone stays the distance.

“I think what will be really interesting is if Tiger steps up to 20 aeroplanes instead of five,” Sir Rod said. “I think then the game will really be afoot.”

Sir Rod also warned of the need to have the right aviation infrastructure in place and for the industry to address the skills shortage.

He said aviation was expected to grow at 4 or 5 per cent a year and Australia would see airport congestion become a bigger social and economic burden unless it ensured it had the right infrastructure in place.

“I’m confident that Australia can meet that challenge but it is still a big challenge,” he said. “And you only need to look at Heathrow, you only need to look at Los Angeles … to realise what happens when this stuff gets out of hand.”

Infrastructure was needed to train pilots and engineers, Sir Rod said.

He said it was not clear whether Australia would have enough engineers and pilots to cope with the coming burst of growth.

While the pilot shortage was more visible, he believed the engineering issue was just as important.

“In some ways it takes longer to train a ground engineer than it does a pilot,” he said.

Australia’s proud aviation tradition also meant locals were in strong demand and the local industry ended up being a training ground for others.

“We’ve always done extremely well, but that means people in other parts of the world want our people,” he said. “Wherever you go in the world you probably find Aussies flying, Aussies working as ground engineers and maybe Aussies working in air traffic control.”

The former airline chief also identified climate change and interference by governments as challenges for the industry.

He said the industry would continue to suffer until governments had the courage to stop owning airlines.

He also said airlines would ultimately be forced to pay their full environmental costs and recommended that they be part of a global emissions trading scheme.

A Report by The Mole from The Australian